When a foreign-invested company starts hiring in China, its first employment contract is often adapted from a global template or signed only after the employee has begun work. That may seem efficient, but it can create inconsistencies between the employing entity, probation terms, job arrangements and internal policies. Before the contract is signed, the company should complete at least five checks.
1. Confirm Which Entity Will Be the Employer
The entity named as the employer should match the entity that actually recruits, manages and pays the employee and assumes the related employment obligations. A China-based branch that has lawfully obtained a business licence or registration certificate may enter into an employment contract as the employer. A branch without the relevant licence or registration may sign only within the authority granted by the employing entity to which it belongs.
Where an overseas investor has not yet completed the establishment of its China entity, it should not simply place employees into a local employment arrangement in the name of the overseas parent company, a preparatory office or an unregistered team. The company should first clarify the interim arrangement, the actual management relationship and the entity that will ultimately assume the employment relationship. This helps avoid uncertainty where several affiliated entities issue instructions, pay remuneration or use the same employee.
2. Do Not Treat the Signing Date as the Start of Employment
In China, the employment relationship generally begins when the employee actually starts work, not only when the employment contract is signed. The employer should enter into a written employment contract within one month after employment begins, and each party should retain a copy. An offer letter, salary confirmation email, overseas employment agreement or the employee’s acceptance of remuneration does not automatically replace a written employment contract that meets Chinese legal requirements.
If no written employment contract has been signed more than one month after the employee starts work, the company may incur statutory wage liability for the failure to conclude a written contract. Contract approval, signature and delivery procedures should therefore be ready before the employee’s start date, rather than being postponed until the end of probation.
3. Check That the Mandatory Terms Match the Actual Arrangement
The employment contract should accurately identify the parties and set out the contract term, job duties and work location, working hours and rest and leave, remuneration, social insurance, labour protection and other legally required matters. The review should go beyond confirming that these headings appear in the document. The terms should also reflect how the employment relationship will be managed in practice.
For example, an overly broad job title, an excessively wide work-location clause, a bonus left entirely to the company’s discretion, a salary structure that does not match payroll records, or a contract that states standard working hours while another working-hours system is used in practice may increase the risk of later disputes. Local requirements should also be checked where minimum wages, social-insurance contribution bases, approval for special working-hours systems or leave standards are relevant.
4. Localise Probation Terms and Global Templates for China
Probation is not an observation period that a company may set freely. Its permitted length depends on the term of the employment contract. The same employer and employee may generally agree only one probation period, and probation pay and termination conditions are also restricted. If a group template follows overseas practice by setting a longer probation period, allowing it to be extended at will or treating probationary employees as temporary staff who may be dismissed at any time, those arrangements may not be enforceable in China.
Confidentiality, non-compete, training service-period, bonus, intellectual-property and termination provisions should not be copied directly from a global template either. In particular, the eligible employees, duration and compensation for non-compete obligations, and the conditions and procedures for termination based on incompetence or misconduct, must align with mandatory Chinese rules and the company’s evidence-management practices.
5. Align the Contract with Internal Policies and Onboarding Procedures
An employment contract cannot, by itself, address attendance, leave, performance, expense reimbursement, information security, disciplinary action, conflicts of interest and other day-to-day management issues. These matters normally need to be addressed through an employee handbook, specific policies and internal procedures.
For internal rules that directly affect employees’ material interests, the company should also consider the required adoption procedures and retain evidence that the rules were published or communicated to employees. If the contract, employee handbook and actual management practices conflict, the company may still lack an enforceable basis when handling performance, misconduct or termination issues, even if the documents appear complete. Before signing its first employment contract, the company should therefore check that the contract template, employee handbook, offer letter, remuneration confirmation and onboarding acknowledgements form a consistent document framework.
How Xeon & Partners Law Firm Can Assist
Xeon & Partners Law Firm assists international businesses with reviewing and localising China employment contracts, employee handbooks and onboarding documents. We identify risks relating to the employing entity, probation, remuneration, confidentiality, non-compete obligations and termination arrangements, and help align the supporting procedures with the company’s management model and actual place of employment.
For businesses that have recently established a China entity or are building their first China-based team, we can also help develop a foundational employment compliance framework covering recruitment, contracting, onboarding and day-to-day management.